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Return Of Property Bubble Not Out Of The Question


After seven years of price declines, the word “bubble” hasn’t been used to refer to the Spanish property market for years without the word “burst” in tow, until Claudio Boada, senior advisor to Blackstone – a giant US investment fund – used it recently at a conference organised by the consultants PwC, saying that vigilance is in order to avoid another bubble inflating in some segments.

Despite a massive influx of US and Asian funds, which the local press points out has led to significant improvements in some segments, Boada said there is no bubble to speak of yet in the Spanish property market. Nevertheless, it’s necessary to “proceed with caution” and “not confuse wheat with chaff” (“no confundir churras con merinas” in Spanish) he said.

Investor expectations also need to adjust to a new reality. Returns will be “considerably lower,” in future than they are at present, he warned.

In recent months Blackstone has done a deal with the Sareb (the Spanish ‘bad bank’) to buy a portfolio of 39 non-performing loans with a nominal value of €237 million. In addition, it’s negotiating the purchase of a portfolio from CatalunyaCaixa – a savings bank that had to be nationalised, and was subsequently sold to Spain’s second biggest bank BBVA.

The audience also heard from Guillermo de la Dehesa, President of the Centre for Economic and Policy Research, who said that interest rates near zero are forcing funds to look for yield in property and distressed assets in Spain.

The hunt for yield could encourage investors to overpay for Spanish real estate assets, or at least accept reduced returns that may not compensate for the risks.

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